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The "limit value" of fuel standards to change the rules of the car market
China is set to introduce its first-ever fuel economy standards for passenger vehicles, marking a long-awaited policy milestone for the automotive industry. Xu Banmin, a senior engineer at the China Automotive Technology and Research Center, revealed that the mandatory national standard "Limits on Fuel Consumption of Passenger Vehicles" will be officially announced on October 28 during a press conference. The standard has already been approved by the State Council, aligning with the draft report.
The government aims to curb the rapid growth of crude oil consumption by implementing these new regulations. If rolled out in phases, the standards are expected to reduce vehicle fuel consumption by nearly 15% in 2008, according to Xu. However, he noted that the 2008 standards will only match the U.S. level from 2002. This is because the Chinese research center referenced U.S. regulations from 2001 and 2002 when developing the limits. In contrast, the U.S. fuel economy standards are based on the average fuel efficiency of all vehicles sold by automakers, while China’s approach is more similar to Japan’s, setting different targets based on vehicle weight and requiring each model to meet specific requirements.
Notably, the limit values have been relaxed by 6% for special passenger vehicles, which include various special structures. However, this relaxation cannot be applied cumulatively. Industry insiders believe that large-displacement, high-fuel-consumption cars, especially SUVs, will face significant pressure once the standards are implemented. This could dampen the popularity of SUVs, which have been a major trend in recent years.
Great Wall Motor’s spokesperson, Shang Yugui, stated that their Saif model, an economical SUV, already meets the first phase of the new standard. He added that Great Wall has the largest engine R&D and production base in the country, ensuring it can adapt to future changes. Similarly, Hua Dongtai Automobile Sales Co., Ltd.’s Yu Dong mentioned that their new diesel model, Huate Telaka, consumes only 7-10 liters per 100 kilometers, compared to 14-18 liters for gasoline models.
However, foreign automakers may resist the new rules, as they might need to adjust their models before entering the Chinese market. Toyota, for instance, has not commented officially but expressed concerns about increased costs. Professor Ye Minghai from Tongji University pointed out that domestic manufacturers like Volkswagen may not redesign entire models for the Chinese market, but companies like Toyota or GM planning to launch new models would have to comply.
Beijing Hyundai’s Sun Zhenjie emphasized that the cost of engine modifications for the new standard is relatively low, around a few thousand dollars per car. However, he also highlighted a critical issue: if the quality of fuel in China does not meet the required standards, even the best-engineered vehicles may fail. He stressed that improving fuel quality requires significant investment from PetroChina and Sinopec, and whether they have the incentive to do so remains a key challenge.
While the new standard is still in its early stages, experts believe it could subtly reshape the auto industry's playing field. With China surpassing Japan as the world's second-largest oil consumer after the U.S., and with 30% of imported crude oil currently used by the automotive sector, controlling vehicle fuel consumption is crucial for energy security. The current fuel economy in China is already 24.7% better than Japan’s 2010 target and 48.4% better than the EU’s target.
Xu Tamming, who was involved in the development of the “limit value,†emphasized the importance of these standards at the 2004 Asia Motor Vehicle Emission Control Annual Meeting. Since 2002, the China Automotive Technology and Research Center has worked with 10 industry companies to develop the “Light Vehicle Fuel Consumption Test Method†and “Passenger Vehicle Fuel Consumption Limit Standard.†These were finalized and implemented in 2003, submitted to the National Standardization Management Committee, and eventually approved by the State Council in September 2004.
An unnamed expert noted that the rapid development and implementation of these standards within a year reflect the central government’s growing focus on addressing local policies that restrict small-displacement vehicles. Despite official efforts to support mini-vehicles, many cities continue to impose restrictions, limiting the effectiveness of such policies.
The introduction of the new fuel economy standards is seen as another step toward correcting local governments’ resistance to small-displacement vehicles. Analysts believe the impact on the overall auto market rules will be much greater than just the immediate market effects.
With rising oil prices and increasing awareness of fuel efficiency, consumers are now placing more emphasis on fuel consumption when deciding to purchase a vehicle. Under the combined influence of policy support and technological progress, low-energy, small-displacement cars may soon reshape the competitive landscape of the automobile market.